TMB Bank Plc. To be the Most Advocated Transactional Bank in Country Investor Presentation 9M17 Analyst Meting 18 October 2017
AGENDA 9M17 & 3Q17 Financial Performance Asset Quality 2017 Target 2
Continue the momentum to grow quality deposit Deposit Volume & Mix LDR and Additional Liquidity (THB bn) TD 600 500 20% 17% +1.4% YTD +1.0% QoQ 15% Deposits Additional liquidity LDR 99% 103% 102% 99% 99% LDR* With additional 20 20 liquity 400 No Fixed & ME 300 200 Transactional (Saving) 100 Current 0 41% 31% 8% 44% 32% 7% 45% 32% 8% % Trx deposit 40% 599 602 608 Dec-16 Jun-17 Sep-17 % Retail deposit 68% 70% 70% Dec-16 Jun-17 Sep-17 Funding structure is more resilient by raising retail base and transaction deposit base to 70% and 40% of total deposits. With less concentration in deposit and excess liquidity from FWD access fee, TMB s LDR is at 102% (LDR with additional liquidity is 98.7%) As a result, TMB was able to focus more on growing transactional deposit Transactional deposit +1.2% YTD, +5.0% QoQ supported by flagship transactional deposit products (All Free +6.6% QoQ and SME one bank +2.8% QoQ) No-fixed grew well (No-fixed +13.9% YTD, +7.5%QoQ), in line with strategy to replace TD by offering primary banking benefit Therefore deposit growth expanded +1.4% YTD or picked up 1.0% QoQ 3
Boosts transactional usage for better customer understanding by offering primary banking benefit Increasing New Accounts and No. of Transactions Unit: ( 000) No. of new retail trxn account monthly average 16 19 190 232 +7% 38 40 454 485 380 9M16 +18% +11% 423 FY2013 FY2014 FY2015 FY2016 9M17 Avg no. of transaction/account/month 1.2 1.6 3.3 Cost of Deposit +2 bps -23 bps 47 To better understanding customers, we boosted transactional usage behavior by Offering primary banking benefit with higher bonus rate (+30 bps) for No-Fixed customers who transact via All Free account 5 times/month To affirm our strategy, TMB continues to built customer relationship by offering series of primary banking benefit e.g. Special Interest Rate for personal loan for those who use All Free at least 5 times/month and Direct Debit service for the payment, aimed for; I. Acquiring new customers (+11% YTD) II. Stable source of funding (% Trxn 40%) III. Gaining information from transactional behavior to enhance the Bank s upselling for sustainable fee income (9M17 retail fee income +51% YoY) Cost of deposit slightly rose to 1.33% or +2 bps QoQ 9M17 cost of deposit dropped 23 bps from 9M16 to 1.29%, resulted from replacing high-cost of deposit (TD) and growing transactional deposit base 4
Loan growth momentum continued, driven by mortgage Performing Loan Volume and Mix +4.4% YTD +0.4% QoQ (THB bn) 599 601 576 Loan Portfolio and Loan Yield (THB bn) Yield 9M17 Retail 26% 27% 29% 5.30% SE 16% 15% 15% BB MB+CB 19% 39% 18% 40% 17% 39% 3.2% 4.7% 5.7% 8.2% Loan Yield Performing loan grew 4.4% YTD, led by retail and working capital from MB & CB. Expected SE to resume growth in 4Q17. -5 bps -27 bps Retail loan +17.9% YTD and +6.4% QoQ with Mortgage as a key driver (+7.6 QoQ, +24.6%YTD) MB+CB loan +3.2% YTD, -2.6% QoQ BB+SE reduced -4.2% YTD, -1% QoQ, Loan yield declined YoY and QoQ due mainly to; Shift in loan portfolio toward mortgage MRR rate cut (-50 bps, effective May 22) Note: MB: Multi-Corporate Banking (turnover >5bn/year), CB: Corporate Banking (turnover 1-5bn/year), BB: Business Banking (turnover 100mn-1bn/year), SME: Small and Medium Enterprise (turnover 100 mn/year) 5
Reduction in loan yields largely from shift in loan mix Loan yield Retail Loan Performing Loan Breakdown 5.46% 574 bn 24% 5.19% 601 bn 29% Change in Yield YoY -27 bps -16 bps Retail loan breakdown as % of performing loan -16 bps : Shift of retail loan portfolio toward Mortgage and Benefit plus (unsecured-low risk) 138 bn 2% 4% 17% 1% 174 bn 2% 4% 1%, Other Credit card Unsecured 22% Mortgage Commercial Loan 76% 71% -10 bps Commercial loan breakdown as % of performing loan -6 bps : Reduction of MLR in April-16 and MRR in May-17-4 bps : Restructured loan (BB & SE) 436 bn 427 bn 2.3% 0.8% 14% 12% 19% 16% 2.6% SE-restructured 1.8% BB-restructured SE BB 40% 39% MB & CB 6
9M17 NIM was in line with target Net Interest Margin (NIM) -9 bps +4 bps 9M17 NIM improved 4 bps to 3.16% driven mainly by optimizing deposit mix by replacing high-cost of deposit (TD) and growing transactional deposit base NIM of 3Q17 reduced QoQ to 3.11%. The reduction by 9 basis points was due to Shift in loan mix toward mortgage loan Excess liquidity from access fee was temporarily placed in lower yielded product before redeploy to lending at higher yielded assets Net Interest Income (NII) (THB mn) +1% YoY Net interest income (NII) therefore, rose to THB18,550 mn in 9M17, +1% YoY Flat For 3Q17, NII remained flat QoQ 7
9M17 Non-NII up YoY, reflecting continued good progress on fee income generation Non-interest income (Non-NII) THB million Other Non-NII Access Fee from FWD Net fees & service income (Excl. Access Fee) Total Non-NII +23% YoY (Excl. FWD access fee +10%) 9,231 2,696 662 2,944 739 2,738 705 482 392 +14% 2,034 2,205 2,034 2,163 2,459-4% QoQ (Excl. FWD access fee +8%) 3,309 3,184 Total net fee -1% QoQ 7,518 1,726 5,792 +15% 1,579 6,656 Total net fee + 32% YoY 3Q16 4Q16 1Q17 2Q17 3Q17 9M16 9M17 For 9-month, Non-NII improved YoY, boosted by fee income 9M17 Non-NII +23% YoY 3Q17 Non-NII -4% QoQ Positive momentum in fee income was driven mainly by retail fees despite weighed down by reduction of loan-related fee. However commercial fee started to see improvement QoQ (if excluded FWD access fee, Fee income +15%) 9M17 Net fee income +32% YoY 3Q17 Net fee income -1% QoQ (the execution of FWD agreement happened in 2Q17, fee income impacted by cumulativeeffect for 2 quarters since the agreement was backdated to 1 st of January, 2017) 9M17 Fee/EA improved to 1.4% from 1.2% in 9M16 (3Q17,1.5%) 8
Fee income has shown good momentum, driven by retail fee Fee Income from Key Products (THB mn) Net Fee and Service Income (THB mn) Bancassurance FWD Access fee Bancassurance -9% QoQ +82% YoY +20% YoY -1% QoQ +32% YoY Others TF LG Loan related MF BA +38% QoQ Mutual fund +8.% QoQ +81% YoY Note: Consolidated Fee income growth was driven by retail fees, especially from strategic products: BA and MF; Retail fee grew 51% YoY, backed by growth in mutual fund (81% YoY) and Bancassurance (+82%YoY) (excluded FWD access fee, BA+20%YoY) Loan-related +26% QoQ -41% YoY QoQ in 3Q17 continued good momentum in mutual fund (+8% QoQ)(+81%YoY) due to Global Income Fund while BA (-9% QoQ) (excluded FWD access fee, BA +38%QoQ) LG +13% QoQ -2% YoY Commercial banking fee posted a negative growth YoY mainly due to reduction of loan-related fee. However 3Q17 the growth picked up QoQ, Trade finance -1% QoQ -4% YoY driven loan-related fee picked up +26% QoQ, LG fee+13% QoQ 3Q16 4Q16 1Q17 2Q17 3Q17 9M16 9M17 Note: Bank-only (prelim) 9
Reaching more customers to provide seamless service % change of transaction per month done through different channels Digital ATM/ADM Branch As of September, 2017 172% YTD 18% YTD 9% YTD 32% Active digital customers 2.4 mn. Total retail active customers Channel Strategy With the trend of people becomes more digital, TMB offers seamless (Omni-channel experience) service across all channels to gain opportunity from underserved customers 2014-2015 2016 For example, TMB Mutual Fund Business Start TMB Open Architecture to provide customers more choices with initially 4 partners introduced Partnership with Amundi enhancing Asset Allocation Advisory to meet customers needs Growing # of Customers and Mutual Fund Fee 300,000 250,000 Mutual Fund Fee (mn.) # of Customers 251,785 4,000 3,500 2017 Fill TMB Mutual Shelf to provide customers with best of choices under TMB Open Architecture with 8 partners 200,000 173,036 2,204 3,000 2,500 150,000 1748 2,000 100,000 50,000-903 9M16 +81% 1,221 mn. FY2013 FY2014 FY2015 FY2016 9M17 1,500 1,000 500 - Offer Provide online service for customer to buy or sell mutual fund (Existing portfolio) through digital channels Offer TMB Advisory services to all customers TMB Branch, Contact Center and TMB Advisory s Line Account 10
Gains on FWD access fee is only a portion from total economic value Strategic Collaboration The objective aimed to develop and provide best-in-class life insurance products to TMB s customers. The Partnership is expected to bring significant benefits to both parties, FWD will gain exclusive access to TMB customers, resulted in building up customers understanding that allow FWD to support TMB in providing variety of life insurance products and services that suit our customers needs Total Economic Value Key Terms & Conditions Implications 3 Profit sharing Profit sharing in every policies sold with no minimum threshold Profit sharing based on different margin tiers Better profit sharing scheme that reflect true performance + 2 Commission No commission rate change on existing product, and align with industry s practices Contribute to fee income similar to pre-renewal and are comparable to industry 1 + Access fee FWD access fee for approximately THB20 bn, net of all taxes and expense, excluding commission and profit sharing is recorded as Deferred revenue in liability side to be recognized quarterly as fee income over the initial term of 15 years. Capital-like nature No claw back scheme, since it was not related to performance or volume The termination of FWD access fee has a lower priority than depositors and debt holders and in the hierarchy same as ordinary shares in the case of bankruptcy With access liquidity, less pressure in deposit level Raise fee up ~15% and Fee/EA up ~20 bps Increase net profit 10-15% Additional capital-like buffer (similar character to Additional Tier 1) 11
Operating expenses increased from business volume & investment Operating Income and Operating Expense (THB mn) +7.1% YoY -0.4% QoQ +6.7% YoY -1.7% QoQ 3Q17 total income slightly declined by 0.4% QoQ The QoQ drop was from the recognition of access fee for 1H17 in previous quarter If excluded the access fee, total income showed an improvement of 3.4% QoQ Operating expense dropped 1.7% QoQ 9M17 total income increased 7.1 % YoY operating expenses increased 6.7% YoY from; Software maintenance expense HR expense, revenue sharing from higher business volume Marketing expense form both retail and commercial to support business volume and new campaign 12
PPOP improved YoY, reflected earnings capability Pre-Provision Operating Profit (PPOP) (THB mn) 8.1% YoY -1.7% QoQ Additional growth of fee income will support quality earning approximately 15% on top of revenue for 15 years onwards, Reflecting the positive momentum in the Bank s earnings capability (PPOP) For 9M17, PPOP was THB14,947 mn, +8.1% YoY PPOP was THB5,048 mn in 3Q17, -1.7% QoQ 13
Cost to income ratio remained in target Cost to Income Ratio For 9M17, Cost to income ratio was stable at 46% in line with the Bank s target 14
AGENDA 9M17 & 3Q17 Financial Performance Asset Quality 2017 Target 15
NPL formation, NPL resolution & Credit cost became more stabilized NPL Formation % Total formation % New NPL formation Formation from restructured loan Formation from new NPL NPL formation dropped to 2.2% in 3Q17 and has been more stabilized Formation from new NPL has moved in a range of 0.8%-1.0% since 4Q16 and slightly dropped from last quarter to 0.9% Formation from restructured loan also declined to 1.4% from 2Q17 NPL Resolution Natural resolution remained slow TMB continued to proactively write off by THB2.3 bn, in in 3Q17 to limit downside risk and keep the balance sheet clean Credit cost Overall credit cost was set in line with the movement of formation and proactive resolution 16
60% Prudence in loan portfolio management 50% 40% P-Normal 30% 20% 20% 18% 16% 14% 10% 12% 10% Loan Portfolio P-Restructured 94.8% P-Rescheduled 94.4% SM-Normal 91.9% 94.1% Pass loan portfolio stayed fairly stable at 94% SM loan slightly rose from previous quarter to 3.4% The Bank has policy to control possible impaired loans which include both restructured and rescheduled loans As of Sep-17, possible impaired loan remained stable at 4.8% NPL reduced and remain at low level 8% P-Rescheduled P-Restructured 6% 0% 4% SM-Normal 2% SM-Rescheduled SM-Restructured 0% TCG claimable NPL 0.6% 1.5% Dec-16 Mar-17 Jun-17 0.8% 2.7% 3.1% 0.2% 2.5% Dec-16 Mar-17 Jun-17 0.5% 0.5% 0.5% 2.52% 2.55% 1.94% 3.4% concession rate loan 1.5% 2.44% Mar-17 Jun-17 Sep-17 Written-off loan 22 bn 26 bn 28 bn Dec-16 Jun-17 Sep-17 Note: Bank-only financial statement 17
NPL ratio reduced to 2.44% 3.8 bn 3.6 bn 3.5 bn TCG claimable NPLs stayed relatively stable in 3Q17 with NPL ratio at 2.44% as of Sep-17 TCG claimable was approximately 20% of total NPLs 18
Maintained prudent provision and coverage ratio To accommodate extra write-offs under slow NPL resolution environment, TMB set aside THB2,391 mn of provision or credit cost of 154 bps in 3Q17 in line with expectation For 9M17, provision was THB6,914 mn or credit cost of 149 bps (Note: written-off loan was required to set up 100% provision, disregarded of collateral value) Coverage ratio stayed at 141% as of Sep-17, remained in target range and reflected prudent provisioning 19
Net profit continued on positive trend +5.6% -14.0% Net profit was THB2,003 mn in 3Q17, -14.0% QoQ For 9M17, net profit was THB6,429 mn (+5.6% YoY), represented an ROE of 10.0% 20
CAR and Tier I remained at strong levels Capital ratios are well above BoT s requirements As of Sep-17, CAR was at 17.9% Tier I and Core Tier I were at 13.6% Note that the decline of CAR and Tier 1 ratios as of Jun-17 was due mainly to an increase in receivables* (100% risked- weight) from the renewal of contract with FWD 21
AGENDA 9M17 & 3Q17 Financial Performance Asset Quality 2017 Target 22
2017 Target Key ratios 3Q17 9M17 Actual 2017 Target Performing loan growth 0.4% QoQ 4.4% YTD 8-10% Deposit growth 1.0% QoQ 1.4% YTD 5-7% Net interest margin (NIM) 3.11% 3.16% 3.1%-3.2% Net fee income growth -1% QoQ 32% YoY 20-30% Cost to income ratio 46% 46% 45-47% ROE 9.2% 10.4% 10%-12% NPL ratio 2.44% 2.44% 2.3-2.5% Coverage ratio 141% 141% 140-150% Credit cost (annualized) 154 bps 149 bps 140-150 bps 23
TMB Bank Public Company Limited 3000 Phahonyothin Road Chatuchak, Bangkok 10900 TMB Website : www.tmbbank.com IR Webpage : www.tmbbank.com/ir Important Disclaimer This presentation contains some information from other sources, that TMB Bank Public Company Limited does not make any representations regarding the use, validity, accuracy, or reliability of, or the results of the use of information, data but not limited to, all text, and images ( the Content ) on this presentation. Some content may contain forward looking statements, that based on management s view upon the information currently available to us. These statement are subject to certain risks and uncertainties that could cause the actual results materially differed from what had been previously stated. The materials in this presentation shall not, and are not intended to, constitute or contain an offer to sell or the solicitation of an offer to buy, any securities of TMB Bank Public Company Limited. 24